32GB iPhone 4S Free on China Unicom for $45 Monthly

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The biggest mobile market today is likely to be where the iPhone 4S sells the cheapest. China Unicom, China’s second-largest mobile carrier, is offering the 16 and 32GB iPhone 4S smartphones for free with contract. But with contracts this long, will subscribers bite?

China United Network Communications, or China Unicom, has announced that it will offer Apple’s latest iPhone 4S for free, conditional on subscribers signing up for a new multi-year subscription. The promotion will start on January 13, and involves either the 16- or 32-gigabyte iPhone 4S model. Users get a free 16GB model on a monthly plan of 386 yuan (about $61 per month) locked-in for two years.

But subscribers might get a better deal with the 32GB model, which actually comes with a lower monthly plan. At 286 yuan (about $45), the 32GB model is free. However, subscribers will have to agree to a three-year contract. At this rate, a user’s iPhone would have been obsolete less than halfway through the contract.

With iPhone 4S subsidies, questions are raised whether China Unicom will likewise be able to offer subsidies to more subscribers, given the cost of the iPhone 4S hardware itself. Giving out the iPhone 4S free will crowd out other smartphone platforms like Android. Unicom’s share price actually fell after the announcement of subsidized prices, and there is question whether the mobile company can afford to offer further subsidies.

Still, this promotion is being announced amid rumors that China Mobile, which is China’s and the world’s biggest carrier in terms of subscriber number, will also carry the iPhone 4S. Either way, the market is huge, with almost 1 billion mobile users in the country — both smartphones and non-smartphones. It seems a big market both for Apple and the telcos that stand to gain from long subscription contracts.

At $45 per month for a 32GB iPhone 4S, it’s already a steal, compared with mobile and data plans in Europe and the Americas. But is a three-year contract too long?